LESSONS FROM AFRICA TO LATIN AMERICA: MOBILE-BANKING ADOPTION
It has been more than a decade since M-Pesa was launched in Kenya and thus mobile banking brought opportunities for the unbanked in this East African nation. For many years, M-Pesa has been presented as a successful case study of how technology can help with financial inclusion, especially in developing nations. The latest Global Findex Database Report mentions that “(findings) suggests that mobile money accounts might be helping to increase access to financial services for poorer adults — and thus reducing inequality between rich and poor in financial inclusion” (Demirguc-Kunt, Klapper, Singer, Ansar, & Hess, 2018). If mobile banking has proven to have so many benefits, why is it that in over a decade its growth has been mostly in Sub-Saharan economies? A common idea could be that mobile banking relies on technology; thus, it is a technological issue on the side of the telecom provider that has limited the expansion of mobile banking. Another thought might be on the side of the consumer, which requires a mobile phone with certain characteristics. However, although variations on how the money is saved and transferred might vary, the technology for mobile banking can be based in SMS messages and thus it does not require an additional technological investment from either the telecom or the consumer. In this paper, we contend that the reason that mobile banking has become widespread in Sub-Saharan Africa and not in other regions in need of financial inclusion is the strength of the institutions in these countries. Douglas North (1990) argued that institutions are the “rules of the game” set by society. In the case of regulations these can shape the distribution of power, the legal foundation, ownership rights, expected costs, among others (Dobler, 2011). Thus regarding to mobile banking, the lack of institutions has allowed telecom providers in Sub-Saharan Africa to create the “rules of the game” and thus thrive in a less-regulated environment. In contrast, when trying to replicate this model in other developing nations with a clearer set of institutions, the results have not been as expected. We will study the case of a telecom provider with operations in both Sub-Saharan Africa and Latin America. We will compare the institutional setting the same company faced when entering both markets. By conducting interviews with top executives who participated in the introduction of mobile banking in both regions, and analyzing the role of the government institutions, we aim to provide some insights of what has resulted in Africa that can be replicated in Latin America.